Currency and Economy News

Welcome to MoneyTransferComparion’s economy and currency news section. Our expert economist will be happy to provide you with a free overview of the most interesting things that happened last week in the world of currencies, as well as a prediction for next week’s happenings.

This section is slightly technical. If you need any assistance on international money transfer and how they work please view our FAQ. If you want to understand the basic concept behind how events impact currencies go here, Trade Account is explained here, technical analysis here, and we have also created top list events in history that impacted currencies for your pleasure.

 

In Depth Commentary on Current Events

  1. Our Brexit Survey March 24 – Read for Brexit prediction, by the people and by our experts.
  2. Our UK economy forecast with Boris Johnson as PM
  3. Our “the demise of the pound” series – against the Euro and against the U.S Dollar

Analysis and Prediction:

Date of publication: December 09, 2019 | Author: Tim Clayton

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Last Week’s Summary

World Economic News Review

No resolution of trade talks

US and Chinese officials both stated that trade negotiations were continuing and a phase-one deal was close, but there were no face-to-face meetings and no deal was announced as underlying tensions persisted, especially after the US expressed support for Hong Kong.

The House of Representatives announced that they would push ahead with the impeachment of President Trump, further complicating the political environment. 

US 

Business confidence data remained important with the ISM manufacturing release declining to 48.1 from 48.3 previously, contrary to expectations of a limited recovery and the fourth consecutive reading suggesting manufacturing contraction.

The services-sector reading was below expectations and ADP labour market data was also weaker than expected with a 67,000 increase in private-sector jobs for November compared with expectations of around 140,000. Confidence in the US outlook dipped again following the data. 

In contrast, non-farm payrolls increased 266,000 for November, well above consensus forecasts of 180,000 and the October figure was revised significantly higher to 156,000 from the 128,000 reported originally. There was a significant impact from the return of striking workers which added over 40,000 jobs.

Unemployment declined to 3.5% from 3.6% while average hourly earnings increased 3.0% over the year.

After mixed data earlier in the week, the jobs data was significant in boosting underlying confidence in the US outlook. Markets considered the chances of an interest rate cut by the end of January at less than 10%.

The dollar recovered from 3-week lows following the data.

UK

The latest business confidence data indicated that optimism recovered slightly late in November. Although all sectors remained in contraction territory, there were some expectations of recovery. 

Although opinion polls suggested a slight narrowing of the Conservative Party lead, markets overall were slightly more confident that Prime Minister Johnson would secure a majority victory in the December 12th election. Expectations that the EU withdrawal would take place by January 31st triggered hopes of a boost to the economy.

A break above technical levels also boosted Sterling.

What are technical levels?

Technical analysis is an important element in currency trading. There are some clearly-defined levels which markets watch closely, especially when it’s a round number. Traders will see these levels as an attractive place to sell the currency. If, however, there is a break above the level, there will be a reversal in sentiment and traders who sold the currency are forced to buy it back again. 

GBP/USD had challenged 1.30 in October and November, but failed to break higher and moved lower again. This time, pressure for gains was stronger and there was a break which encouraged further buying to 7-month highs above 1.3100. The move was enhanced by EUR/GBP dipping below the important 0.8500 level to 30-month lows around 0.8420.

Euro-zone

German production data remained fragile with a decline for October, although the latest business confidence data suggested a slight recovery was possible early in 2020.

The ECB will undertake a review of monetary policy in 2020 and there was further speculation that the bank would raise its inflation target slightly. This would maintain pressure for extremely low interest rates and the Euro still struggled to gain significant support.  

International

Chinese PMI business confidence data continued to signal monthly improvement with slightly stronger sentiment towards the global economic outlook.

The Reserve Bank of Australia held interest rates at 0.75% following the latest policy meeting and indicated a patient short-term stance given that rate cuts will take time to have an impact on the economy.

The Bank of Canada held interest rates at 1.75% following the latest policy meeting. Although there were further concerns over global trade disputes, the bank was broadly optimistic over the outlook and pointed to an increase in investment.

The more confident than expected tone triggered Canadian dollar gains, but there was a sharp reversal following Friday’s jobs data. Employment declined over 70,000 for October with unemployment increasing to 5.9% from 5.5%.

Next Week’s Forecast & Events

a Men Looking at Economic Forecast

Trade talks face key deadline

US-China trade developments will continue to be watched very closely, especially with a key date next weekend.

As things stand, the US has pledged to impose more tariffs on Chinese goods on December 15th. The US Administration will, therefore, have key decisions to make this week. Any move to agree a trade deal, suspend the new tariffs and roll-back existing tariffs would provide a notable boost to market sentiment. 

Alternatively, tariff imposition could be delayed until next year with talks continuing which would be broadly neutral.

If these tariffs go into effect and there is no phase-one trade deal, confidence in the global economic outlook will decline sharply and there will be a fresh flood of funds into the yen and Swiss franc. 

US

The Federal Reserve will announce its latest monetary policy decision on Wednesday. There are very strong expectations that rates will be unchanged at 1.75% and there is no real chance of a change in rates.

The latest policy statement will be watched closely and Chair Powell will hold a press conference.

At this meeting, there will also be an update to the latest projections from Federal Reserve committee members. These projections will be important for underlying sentiment towards the 2020 interest rate policy.

The dollar will be supported initially if the projections suggest that rates will not be cut in 2020.

The latest CPI inflation data will be released on Wednesday and retail sales release on Friday.

UK

The latest GDP and industrial production data will be released on Tuesday. Data releases will, however, be overshadowed by political developments with the General Election on Thursday.  The exit poll will be released at 10.00pm UK time Thursday.

The final opinion polls will be watched closely with a particular focus on the important YouGov survey due for release after Tuesday’s New York close.

Indications of a Conservative Party majority would support Sterling, although further gains would be limited ahead of the vote. Overall volatility will inevitably be high after the result.

If Johnson does secure a victory, Sterling should secure further gains on expectations that Brexit will take place by January 31st. Any other result would trigger sharp short-term Sterling losses on renewed uncertainty and Brexit chaos.

Euro-zone

The ECB will announce its latest interest rate decision on Thursday. Although no policy changes are expected, the meeting will still be important, especially as it will be the first once presided over by Lagarde.  Her press conference will, therefore, be watched very closely for policy hints and medium-term direction. 

International

The Swiss National Bank will announce its latest quarterly interest rate decision on Thursday. Consensus forecasts are for rates to be on hold at -0.75%, but there has been some speculation of a rate cut.

Bank of Canada Governor Poloz is due to comment on the economy on Friday. Oil prices will also have an impact on the Canadian dollar.

Currency Forecast for Next Week

Currency pairSpot 1-week forecast1-month forecast
EUR/USD1.1061.1081.113
USD/JPY108.6109.4108.3
EUR/GBP0.8420.8250.820
GBP/EUR1.1881.2121.220
GBP/USD1.3141.3431.357
AUD/USD0.6840.6890.695
USD/CAD1.3251.3201.313
USD/SGD1.3611.3581.355
USD/HKD7.8287.8357.840
NZD/USD0.6560.6600.670
GBP/JPY142.6146.9147.0
GBP/AUD1.9221.9491.953
GBP/NZD2.0022.0352.026
GBP/SGD1.7871.8241.839
GBP/HKD10.2810.5210.64
GBP/CHF1.3001.3391.354
 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including Investing.com and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 


Information expressed in this article and on MoneyTransferComparison.com as a whole does not constitute as financial advice. If you decide to make any actions based on the information you read, we shall not be held responsible.

 

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